Approximately 300 biotechnology, pharmaceutical, equipment, biofuels and medical device companies are based in Virginia, mainly clustered around universities in Blacksburg, Charlottesville, Richmond, Norfolk and Northern Virginia. This blog is an informal diary of what is going on with the industry in Virginia. Opinions here are those of the posters and not necessarily shared by Virginia Bio.

Tuesday, September 11, 2007

From the moment the courier arrives at Bostwick Laboratories, around 6 a.m. most days, the clock is ticking.

Around the United States, and around the world, people are waiting on a diagnosis -- do they have cancer or not?

The answer lies in the packages that are delivered to Bostwick's laboratories and offices in the Innsbrook Corporate Center each morning.

Thousands of tissue samples come to the medical laboratory company every day -- many of them prostate biopsies sent by the company's client physicians. Bostwick Laboratories' job is to analyze those samples and provide a diagnosis.

In a first-floor laboratory in one of the company's two Innsbrook buildings, a team of histotechnologists trained to prepare slices of body tissue for examination by pathologists goes to work preparing the tissue samples. The samples, so tiny they are barely visible, are put through a highly technical, multistep process, including dyeing them and placing them on slides, before going to the company's 25 pathologists -- medical doctors specializing in diagnosing diseases -- for examination.

The aim is to provide a diagnosis to the physicians, and thus to patients, within 24 hours.

"From a patient's standpoint, you want to know as a soon as possible," said Leroy Mell, the company's chief laboratory officer. "You don't want to be sitting around for a week or two waiting for results. The patient comes first."And when it comes to diagnosing cancer, speed can't mean sacrificing precision. "Our goal is 100 percent accuracy," Mell said.

With those kind of demands, the company's operations are suffused with what Dr. David Bostwick calls "a sense of urgency."

"That's a phrase we use a lot," said Bostwick, an internationally acknowledged expert on prostate cancer who founded the company that bears his name in 1999.

The same phrase could be used to describe the growth of Bostwick Labs. In only eight years, it has expanded from just a handful of employees to a company with 560 employees. In addition to its main offices and laboratories in Henrico County, the company has opened labs and offices in Florida, Arizona, New York and London.

"We receive specimens from as far as Russia, South Africa, Japan, Thailand, and of course, the United States," Bostwick said.

Bostwick came to Richmond to work for a urology practice while he got his business off the ground. The company has stayed here, he said, because of the Richmond area's central location on the East Coast, its low cost of doing business, and the skilled work force.

In March, the company announced a three-year expansion plan that includes investing $4.6 million to expand its laboratories and offices. The company also announced it was hiring about 600 people (about 150 of whom it has hired this year). The expansion plan would bring total employment to around 950.

"We're probably the biggest company in Richmond that you have never heard of," said Gary S. Levine, the company's chief financial officer.

He is only half joking -- most people who get biopsies probably don't think much about what happens to their samples, or who is involved in the diagnosis.

While hospitals -- including the major hospitals that serve the Richmond area -- have their own pathology departments, many physicians at urology centers or other practices rely on outside laboratories for diagnostics.

The laboratory-services industry is anywhere from a $45 billion to $60 billion business in the United States. Two big, publicly traded companies, LabCorp. and Quest, dominate the industry, but there are also about 3,500 smaller players around the country, Levine said.

"It's a highly fragmented industry," he said. "But there is a growth boom. That's driven by two things. Number one, payers are willing to pay more for diagnostics," Also, as baby boomers age, they need more medical tests. "That is what has driven a lot of our growth," Levine said.

Bostwick said the privately held company is on track to reach or exceed $100 million in revenue this year. The company has focused on a niche market within the laboratory services: anatomical pathology, specifically urologic pathology. Most of its business still comes from analyzing prostate biopsies, although the company is expanding into other areas including kidney, gastrointestinal and gynecological diagnostics. The company also has a division that works with major pharmaceutical companies on clinical trials.

Unlike much larger labs, "we don't try to do all things for all people," Bostwick said. "What we have tried to do is narrow our focus into those areas where we have core competencies."While hospital pathologists often analyze biopsies from about 24 organs in the body, "we focus mainly on urologic pathology," Bostwick said. "With that focus, we are able to maintain a very high level of productivity, accuracy and a quick turnaround time."

That emphasis on focused markets and efficiency enables the company to generate higher profit margins. As a privately held company, it puts its money back into its operations. Also driving its growth is the company's introduction of new types of diagnostic tests that are faster and more accurate than conventional methods.

The company's expansion around the United States and in other countries also has come through an ambitious sales effort driven by Jed D. Fulk, vice president for sales and marketing.Fulk, a West Point graduate and former U.S. Army officer who joined the company in 2003, is leading the company's charge into new regions and new specialties. He keeps maps in his office marking the areas where the company is introducing sales reps and finding new clients. A self-described workaholic who is usually sending out his first e-mails by 4 a.m., Fulk has a desk full of résumés.

"I'm hiring sales reps," he said. "We have doubled the number of sales reps to over 70 in the country, and by the end of September, we will have over 100."A lot of the company's growth, Fulk said, can be attributed to physicians' admiration for the man at the top, David Bostwick. Some local physicians confirm that.

"He is trading on his name, which is a well-respected name," said Dr. Sam Graham, co-founder of Urology Specialists of Richmond, who has used Bostwick Labs for diagnostics. "If you ask most urologists around the country, 'Do you know who David Bostwick is?' They will say yes."Before founding the company, Bostwick was a professor of pathology and urology at the Mayo Clinic from 1991 to 1999. He has written 16 books -- including the best-selling textbook on urologic pathology -- and more than 400 papers.

Bostwick had the idea of starting a laboratory with a 24-hour turnaround in 1985 when he was a doctor at University of Chicago Hospitals. His colleagues there, however, thought the idea was impractical. But Bostwick, who later moved on to the University of Maryland, didn't let go of the idea.

While earning an MBA in the early 1990s, Bostwick wrote his thesis on setting up a laboratory with same-day results reporting."We have had the technology for 25 years," but it was never utilized that way, he said.Graham and Dr. David Wilkinson, chairman of the pathology department at Virginia Commonwealth University, said the company has thrived on providing specialized lab services to physicians who often don't have access to that kind of service in their own communities."I think the demand for highly specialized knowledge is growing, and that is where Bostwick Labs has found its niche," Wilkinson said.

In the Richmond area, Wilkinson said, the biggest impact the company is having is driving job demand for workers such as histotechnologists and medical technicians. Those kinds of workers are already hard to find.

"The good news is that should help the salaries of those people, who are very highly trained, very skilled people and probably have been underpaid in many ways," he said.Although many patients may not recognize the name, Bostwick Labs has earned recognition in the business community. In 2005, the company was named by the Greater Richmond Chamber of Commerce as the fastest-growing privately held business in the Richmond area.

"We grew 95 percent last year, and are on target to grow 100 percent this year," Bostwick said."We expect to grow at doubleor triple-digit rates in the near future."

With that kind of growth, the company is sure to attract investor interest. Executives say the company is considering a public stock offering.

Growing players in the industry also tend to attract buyout offers. While acquisitions might be on the table, Bostwick said a buyout is not.